Bird

If you are with Prudential then there is probably a salesperson making a commission on your investments. You need to go through your literature and/or ask your employer and figure out who that person is and make him or her earn those commissions by asking him or her these questions. Having said that, I will comment...if you said that your goal is to retire in 10-15 years, then the manager's job is not to make sure you don't lose money each quarter. It's to maximize your return in 10-15 years. And if you earn 2% over the next 15 years then s/he did a crappy job. You have to take some short-term risk, which means that sometimes you will have short-term losses, in order to make money over the long run. That's just a general investing concept that isn't very comforting when you are losing money. But it's not like they are making decisions each quarter and saying "mmm, should we buy this investment that is going to lose 6%, or this one that is going to make 2%...I'll take the 6% loss, thank you." They are looking at some investments that should average more than 2% versus some that guarantee 2%. Whether they made wise decisions or not, unfortunately, can only be answered in 10-15 years. This doesn't mean that all is well. You might want to ask about the expenses that you are paying, in particular indirect expenses, on the funds and possibly in "wrap fees" or "asset charges" (or similar names). If the investment manager is doing a decent job, which in this market might be breaking even (actually that would be a great job) but your expenses are 2%, then you're going to have a 2% loss. See note above about someone getting paid - if they didn't explain this, then you're getting lousy service. (Edited to fix typo)

How about - has anyone had the IRS reject a 5310, ever?

There is at least a chance of getting approval - you could probably cite the cost of running the plan and say "the perceived benefits are not worth the cost of maintaining the plan." We've used that (but not after a year). The IRS really doesn't want to issue unfavorable letters. I think the permanency requirement is that the plan is intended to be permanent, and if someone changes their mind after learning what maintaining a plan really means, you can't force them to continue it. It's probably a bigger concern if there were huge deductions in year one and that was the main purpose, to get those deductions and bail out. The more I think about it, the less I think they would care, at least in a non-DB instance. Having said that, I wouldn't make it my problem. Lay it all out and say you just don't know what they'll say, and that the only thing you can recommend is that they keep the plan. If they want to do something else, it's their call.

I've seen it before and agree with you (that it's wrong to not include the insurance as you would any other asset). I assume they have treated premiums as expenses, and that's just...wrong.

You might want to examine that language a little more closely to see if it properly interpreted as the same as the company's fiscal year at that time or always the same. It sounds like it's being interpreted as always the same, and if your current TPA is saying that, then I think it is fair to ask why a VCP submission is needed. That is, they're saying the plan amended itself, so why is it necessary to amend it. Me, I'd look for a reason to say the plan's fiscal year is still 6/30, that is, if it's not crystal clear that the plan's year was supposed to change with the corporate year then that's better. [Edit: I started this reply a long time ago and finally finished it and see multiple responses from Sieve and ERISAnut in the meantime...]

An adviser would only give the illusion of value with these kinds of questions. What is an adviser going to do to prevent those kind of losses? Nothing, other than not buy that type of fund at all. There is no way in the world to determine in advance that one of these funds would be prone to such losses and the other not. Each invests in 5 to 10 mutual funds offered by the fund family. The Vanguard funds are all index funds and the T. Rowe Price funds are actively managed. The Vanguard expenses are lower because they aren't actively managed. We could have a long discussion about active management vs. index funds but it doesn't matter that much for this discussion. It's time in the market that matters, not timing the market. Here is a motivated person who seems to understand that, and doesn't need to worry about short term market fluctuations, or which exact fund is the "best." If you invested in a market basket of stocks in 1928 you'd have more than you started with in 1948 - likewise any 20 year period thereafter. That's about all this person needs to know. BTW, I'm not saying advisers are useless. But the ones I've seen that purport to pick the "best" funds from different families aren't worth whatever fee they charge, IMO. They just chase performance.

Spicoli, it probably doesn't matter too much, as long as you realize that if you pick that kind of fund you need to stay in it for a long time. In hindsight, one or the other will prove to have been "better," at least in absolute returns, but don't fret about it. You've apparently made a good decision to invest for the long term and that's a lot more important than which of these two similar funds to invest in. Since you're obviously looking at no-load funds I don't understand the other references about talking to an adviser.

Plan has transferred most account from brokerage firm A to firm B. One account for a terminated participant lags behind; we track down the participant and tell firm A to transfer the funds to firm B. Firm A, for reasons that I cannot begin to fathom (I guess total incompetence is a "reason"), pays everything to the participant, who cashes the check. The participant is entitled to a distribution, and forms have already been completed electing a cash distribution, so at least we have the paperwork needed. And I think we have convinced the participant to return the unvested money (minor detail!). As to the withholding...I don't think there are any real consequences to not doing it. I think the participant has some kind of legal claim to force the plan to pony up the amount not withheld, but then the plan would have a legal claim to recover the same amount, so it's a wash. I don't think the IRS will actually do anything about it; the 1099-R will be filed showing what actually happened (taxable distribution with no withholding). Has anyone had experience with this? Is there any point in putting the brokerage firm on notice that if there are any consequences, the plan intends to hold them liable?

Yes, it can be done. Of course if he's an owner he still has to take RMDs.

I think it's viable but I wouldn't do it. It's the kind of thing that could wind up on the pages of the WSJ, or worse, at some Congressional hearing. I'd figure something out with multiple plans (one with immediate eligibility) or maybe amend the plan as needed to let individuals in right away. Or just say "No, get over it."

I share the concerns about "rolling" the 403(b) assets into the 401(k); that's something that can be done be each individual but not at the plan level. But I'll also say that Benicialist may indeed be describing a situation where most or all participants did elect a rollover; I've seen it. And yes, a final 5500 needs to be filed for the 403(b) and you're done...I guess there's an outstanding question as to whether 5500s had been filed at all, but there is a decent chance that the answer is yes, and a decent chance that the final 5500 was filed too. Remember that a 403(b) 5500 is just some very basic info about the sponsor and plan name; no asset information, and the "final" 5500 is not a big so Benicialist may be leaving out information that doesn't seem important. But...there is a possible fly in the ointment. The IRS has made noise recently that a 403(b) isn't completed "terminated" until all contracts have been liquidated or rolled over, so in theory, if a participant or two failed to do something with their 403(b) contracts, the sponsor would have to keep filing 5500s, and under the new reporting rules, would also have to keep track of the assets...on these contracts that are "in the wind." I'm hoping that the IRS is just making a technical observation. There's no way they can enforce it and it's frankly of no concern to me because it's ridiculous. But there it is.

The facts point to a conclusion that there is no error to be corrected: 1) his last election was for 5%, 2) 5% was withheld for a year or so with no complaints. Obviously, he needs the money, and has figured out that if he can get it "back" (as a taxable wages) instead of "out" (as a distribution) he'll save the 10% premature distribution penalty (assuming he's under 59 1/2). And he may get it sooner if the plan has a delay for distributions. He's grasping at straws.

I agree with David Rigby. And also with GBurns, as his comments apply to this item as well. Unfortunately I have no one to vote for. Ron Paul I guess. Sigh.

No. There is no such thing. Whoever came up with this rumor needs to provide substantiation for it.

I haven't had any audits of terminated plans where we didn't file a 5310 (knock on wood), but I did have an audit of a plan where we had filed a 5310 and I felt that having the DL on termination was of no help at all. I understand that a 5500 audit is going to focus on operational issues, and the 5310 filing is going to focus more on document issues, and maybe I was being unrealistic, but it just left a bad taste in my mouth, having told the client that there was a big advantage to filing the 5310, but then having to still ask the client to root around in an old storage warehouse 3 years later (the company itself was out of business) for a bunch of useless records. With the cost now at $1,000 (and I work mostly on small plans), that is a very real expense with questionable value, IMO. We use volume submitter plans, don't make any changes from pre-approved language, and adopt good-faith amendments for any laws or regs that become effective prior to termination. I'm prepared to say "go for it" if the IRS wants to DQ a plan because we used the word "and" instead of "or" in some dumb amendment that doesn't mean squat anyway...at least in a plan with $100,000 of mostly participant money; I know they don't want to do that. Now if it's a $1,000,000 plan and that's the owner's money, we're almost certainly going to get a DL. In between is where it gets interesting.

I think, in this instance, that the primary consequence of failing to distribute assets within one year is that your document will probably need additional amendments for law/regs that became effective in the meantime. If it's a prototype I'm not sure that it's an untimely amender unless you know of something that was missing originally. I guess a 5310 filing now would provide cover to assure that what you're doing is ok, but I don't know that anything so bad has happened. I've grown skeptical of the benefits of 5310 filings, at least in relation to the costs.

It was effective for returns due after 12/31/05, so you're ok, and I think the 2006 forms already reflected the change. Just write back and explain their rules to them. (Unless there was something else wrong, like maybe you didn't put in the extended due date, and the form letter didn't make that distinction?)

Here are some thoughts and questions: By "recordkeeper" I assume you mean third party administrator, or maybe accountant filling out the 5500. And by "administrator" I assume you mean "new" (third party) administrator or other person now filling out the 5500s. That would appear to the person to ask if there is a fee, no? As I see it, IF there are any red flags on the Schedule I (and having seen some crazy stuff, and yes, having made some mistakes myself, I have to wonder if there really ARE any red flags), then having non-participant loans would be a bigger flag than participant loans. And if a 1999 filing hasn't created a problem by now, I see no reason at all to go back and correct it. In fact, I'd say it's flat-out stupid to suggest that it's necessary to correct a 1999 Schedule I filing for such an error. (Either that or someone is trying to generate revenue.) If I were taking over this plan, I might want to correct a year or two in the past, but for the most part, I'd be content to just start doing it right. And I don't see that the 5310 filing has much to do with it; I'm always amused by the thought that the government is cross-checking multiple databases and looking for inconsistencies. Hah! What's the first thing they ask for when a return is audited? Copies of everything that you already gave them in one form or another. If people don't have enough to do they can dig a hole and then fill it back in instead of correcting 1999 5500 filings. Sheesh. Life's too short.

It's a protected benefit.

Maverick, that's not a bad idea as a work-around for something that shouldn't be done anyway (as you note). I would use caution though, in using the word "forfeit." It's not a forfeiture in the plan sense of the word; it's just money that should never have been allocated in the first place. FWIW.

Sieve- DOL final regs 10/19/2000, FWIW. I agree with everything else you said.

masteff, thanks for taking the time to post those newer PLRs. I agree with your analysis ("What seems to matter most is being co-grantor and sole beneficiary of the trust and having unrestricted right to distribute proceeds of the trust to oneself as beneficary of the trust.")

FWIW- I don't think the references to the preamble to the final regs or Pub 590 are all that relevant. I think they are talking about determining the designated beneficiary for purposes of determining minimum distribution requirements, and that's not the issue here; the issue is "can a distribution to a trust be paid out to the spouse and rolled over?" The good news is that the PLR does allow a rollover in a similar situation, but it's worth noting that 1) the PLR specifically says it is relying on the old 1987 final regs, and 2) the spouse was also the sole surviving co-grantor of the trust and had complete control over the trust. In the case presented here, we are told "The Trustee wants the IRA to "Rollover" the IRA into the name of the surviving spouse." We don't know if the trustee is the spouse or not; the wording leads me to believe it's not. I'm not 100% sure how important that is but I do think it is significant. The bottom line is that there are enough concerns for me to conclude that this is far from a slam dunk, and the result could be as ERISAnut described early on - a taxable distribution to the trust, and an ineligible rollover to the IRA. I would either not do it or get a PLR. (If there are other, more recent PLRs I'd love to see them. I'm not saying for sure that it can't be done, but I just don't see the cites as that convincing.) --- edited to add italics

It may be a good idea. I think it depends upon the participant's account relative to the size of the plan as a whole, and of course the loss in question. But if it is a significant account and there's no interim val, then the remaining participants will suffer greater losses as a result of this participant's account not being allocated its "fair" share. I wouldn't assume that just because gains have not been revalued means that this loss can't be - I'm not saying that past practices are totally irrelevant either, but if participants are usually paid out in March or April and this one is September (or October or...) then those other payouts aren't that significant to me.

I think you're right to question this. If they want the money to be "direct deposited" they can set up something to sweep it from her checking account; you just can't do a "direct" deposit to a third party, IMO. And yes, you do your regular 1099-R filing. It's possible that most, maybe all, residents don't have to file because they don't have enough income, but that doesn't mean they don't have to get a 1099-R. Keep us posted.